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Q14SE

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Horngren'S Financial And Managerial Accounting
Found in: Page 773

Short Answer

Preparing the direct method statement of cash flows Red Toy Company reported the following comparative balance sheet:

Requirements

1. Compute the collections from customers during 2018 for Red Toy Company. Sales Revenue totaled $134,000.

2. Compute the payments for inventory during 2018. Cost of Goods Sold was $79,000.

Requirement 1. Collections from customers during 2018 is $123,000

Requirement 2. Payments for inventory during 2018 is $63,000.

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Computation of collections from customers during 2018 for Red Toy Company

Particulars

Amount($)

Particulars

Amount($)

Account Receivables (31st December,2017)

42,000

Account Receivables (31st December,2018)

53,000

Sales revenue

134,000

Cash collected (Balancing figure)

123,000

Total

176,000

Total

176,000

Step 2: Computation of payments for inventory during 2018

Cash paid for inventory = Cost of goods sold – Beginning merchandise inventory + Ending merchandise inventory + Beginning Accounts Payable - Ending Accounts Payable

Cash paid for inventory =$79,000 –$88,000 + $76,000 + $38,000 - $42,000

=$63,000

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